Branson’s Virgin stake up in the air

Virgin Australia
did a good job of stealing the limelight from
Qantas
last year. And aviation enthusiasts can’t help but note the powerful array of international airlines attracted by
John Borghetti
’s strategy.

The question is: which of Virgin’s three shareholder alliance partners could be game enough to take out
Richard Branson
’s remaining 26 per cent stake in the Australian carrier? Etihad and Singapore own 10 per cent each and the Middle East group has already said it wants to move to 19.9 per cent, in line with Air NZ.

If any of them were to make an offer for Branson’s stake, it would necessitate a bid for the rest of the airline as the 20 per cent takeover threshold would be crossed. There is a theory that such an offer would be rejected by the other airline investors, meaning it could be an avenue to build an effective controlling interest without acquiring all of Virgin.

Etihad likes taking minority interests in competitors and has used its influence to funnel more traffic via its hub in Abu Dhabi while aligning product and frequent flyer programs. But CEO James Hogan has also said he has no interest in running an Australian airline from the United Arab Emirates.

So if not Etihad, what about Singapore or Air NZ? For now at least, it seems neither would have to make such a move if the only concern was protecting their exposure to Australian traffic flow. The joint venture-style alliances Virgin has in place with its strategic investors mean they can reap most of the benefits that would flow from a takeover already.

Everything could change if one of the passive investors breaks ranks and pushes for a board seat. It doesn’t appear anyone is agitating for a change in strategy at Virgin just yet but if one does, it could prompt another to step up with a bigger power play at Australia’s No. 2 airline.